Texas gov. rejects stimulus money for unemployment

In this Jan. 27, 2009 file photo, Texas Gov. Rick Perry delivers his State of the State message in Austin, Texas. Perry plans to turn down $555 million that would expand state unemployment benefits, saying the money would have required the state to keep funding the expanded benefits after the stimulus money ran out. (AP Photo/Harry Cabluck)
— AP

In this Jan. 27, 2009 file photo, Texas Gov. Rick Perry delivers his State of the State message in Austin, Texas. Perry plans to turn down $555 million that would expand state unemployment benefits, saying the money would have required the state to keep funding the expanded benefits after the stimulus money ran out. (AP Photo/Harry Cabluck)
/ AP

HOUSTON 
Texas Gov. Rick Perry announced Thursday he turned down $555 million of federal stimulus funding that would expand the state's unemployment benefits, saying the money would have required the state to keep paying for the expanded benefits after the stimulus money ran out.

Perry, an outspoken critic of President Barack Obama's $787 billion stimulus bill, did accept most of the roughly $17 billion slated for Texas in the plan. But he turned down the unemployment benefits because he said it would require the state to increase the tax burden on Texas businesses.

"During these tough times, Texas employers are working harder than ever to move products to market, make payroll and create jobs," Perry said at a news conference. "The last thing they need is government burdening them with higher taxes and expanded obligations."

Other Republican governors have said they will turn down federal stimulus money, including Louisiana Gov. Bobby Jindal, who said he would not accept nearly $100 million to expand unemployment benefits.

Moments after Perry said he would reject the money, the House Senate Committee on Federal Economic Stabilization Funding voted 5-1 in favor of a motion encouraging the Legislature to make the necessary changes to enable the state to receive $555 million. Republican Rep. Jim Pitts, chairman of the powerful House Appropriations Committee, was among those voting in favor the motion.

Perry's announcement was immediately criticized by Democratic lawmakers and advocates for low-income residents.

"Without this federal money, Texas businesses face increased unemployment insurance taxes in bad times, and without the modest reforms in state law required to get the federal money, about 45,000 Texas workers will go without unemployment insurance," said Don Baylor, a policy analyst for the Center for Public Policy Priorities.

Sen. Kirk Watson, D-Austin, said rejecting the money "demonstrates the height of denial about the challenges confronting this state and its people."

Watson said it's now up to the Legislature, which can still try to accept the funds but risks a gubernatorial veto.

"I would not jump to the conclusion that we're not going to get the money," Baylor said. "The governor's decision puts a red light in front of the Legislature, but the Legislature still plans to go forward and hold hearings on these bills and try and get votes."

To receive the full amount of stimulus money available, lawmakers would need to adjust the time period used to determine whether people are eligible for benefits, using the four most recent quarters to determine how much a person gets instead of the current method that goes back 18 months.

Texas would also have to expand eligibility to include thousands of low-wage workers. Lawmakers have said the change would help part-time employees like single mothers, college students and senior citizens.

Perry said the requirements attached to the federal stimulus money would require a change in the state's definition of unemployment by expanding it to include part-time employees. He said such an expansion would counteract the package's objective of job creation by leading companies to limit hiring and raise prices.

The governor's decision comes despite warnings from Texas Workforce Commission Chairman Tom Pauken that the state's unemployment compensation trust fund could be operating at a deficit by October. Pauken told lawmakers recently that insolvency might not be not far behind.

–––

Associated Press writer April Castro in Austin contributed to this report.